When Bitcoin’s value shot up instantly at the end of 2016, potential investors and consumers alike started taking a keen interest in cryptocurrency and wanted to make an investment in one of them. While cryptocurrency has proved itself to be one of the imminent financial systems in the recent times, let’s not completely neglect the digital currency pros and cons.
Like any other financial system i.e. banks, electronic payment systems such as credit cards, PayPal etc., digital currencies also have some benefits and drawbacks. There are several advocates of cryptocurrency that will always speak highly of digital currencies and will always suggest investing in one. On the other hand, there are also some people who do not like the idea of investing in a cryptocurrency as they believe they are highly risky and volatile.
However, before arriving at any conclusion, we’d like you to check the pros and cons for yourself and then form an opinion on digital currencies.
Digital Currency Pros and Cons
Below you will come across a list of digital currency pros and cons that will help you understand much better about them and then eventually help you with deciding if investing in one is suitable for you or not.
Pros of Digital Currency
Believe it or not, there are lots of great things about cryptocurrency. Cryptocurrency is a digital currency designed to work as a medium of exchange. It uses cryptography to secure the financial transactions, control the creation of additional units as well as validate the transfer of assets. Let’s have a look at some of the benefits of cryptocurrency.
By nature, cryptocurrencies are public and open-source systems. However, the majority of digital currencies are built with top-notch security and privacy, keeping your financial transactions private and secure. Though your transactions are tied to your cryptocurrency address, all the detailed information of the transactions are available on the public ledger.
Low Transaction Costs
One of the most integral benefits of cryptocurrencies is that they offer low transactions costs. Unlike other expensive electronic payment systems such as money transfers with banks and PayPal, cryptocurrency tend to have lower transaction fees. This indicates that it generally costs less to transfer funds from one to another if you’re using a cryptocurrency.
Fast Financial Transactions
Another benefit of using cryptocurrencies is that the financial transactions get processed quite quickly. As soon as the transactions are recorded in the blockchain, they are considered as final. Unlike other financial systems, cryptocurrencies tend to process the transactions in a short span of time. All the transactions are fast, permanent and cannot be faked.
Cryptocurrency is Not Inflationary
The system of the cryptocurrencies has been designed not to be inflationary in the long run. With digital currencies like Bitcoin, there is a set limit on the total number of coins that will come into existence. People can predict how much of a certain digital currency will exist at any given time in the near future.
Easy to Use
Many people have a misconception that operating and using a cryptocurrency is quite complicated, hence they stay away from it. However, the truth is, any person can learn to operate a cryptocurrency. Even a person having no technology background or skills can easily set up a digital wallet, get access to a Bitcoin address and start buying, selling, sending, and receiving digital coins such as Bitcoin and Litecoin.
Cons of Digital Currency
As with any new financial system or technology, there are some shortcomings that need to be fixed. After looking at the pros of digital currency, it’s time for us to take a look at some of its cons.
High Risk and Volatile
The cryptocurrency market is considered highly risky and volatile. The value of a certain digital coin can instantly shoot up and then plummet down within a short period of time. The values keep changing frequently and sometimes even by wide margins. When the value of Bitcoin skyrocketed at the end of 2016, lots of investors reaped huge profits from it. However, there were many people who lost funds when its value was crashed.
No Recovery for Coins
If you happen to accidentally lose some of your digital coins, there is no way you can recover them. In fact, there is no system that can help protect the value of your coin. Even if something goes wrong with your transaction, you cannot recover your lost coins. Also, when someone steals your digital coins, you cannot catch the thief as there is no system that can help rectify the problem.
Facilitates Criminal Uses
Cryptocurrency may offer privacy and legitimacy but the same privacy can also be used for illicit purposes. For instance, there have been serious allegations made against Bitcoin for facilitating criminals to take part in illegal activities such as money laundering, the exchange of illegal goods and services and terrorist funding. This is one of the cons that could keep investors from investing in digital currencies.